Transcript Supplemental Questions

1. The Dixie Chicken currently sells 1,500 burger plates per month for
$3.50, and the own-price elasticity for this platter has been
estimated to be -1.3. If Dixie Chicken raises prices by 70 cents, how
many platters will be sold?
2. Calculate the income
elasticity from the
following graph between
points A and B and
between points B and C.
Define as specifically as
possible the type of good
represented by each income
elasticity.
I
C
$30
$25
$20
B
A
8 9
12
Q
Pbananas
3. Consider the following
demand function for
bananas. Calculate the
own-price elasticity of
demand.
A
$6
B
$2
8
12
Qbananas
4. You read in the Bryan-College Station Eagle that Texas A&M expects
the price of tuition to rise by 3% for this coming fall semester. As well,
Texas A&M expects the number of admission applications to drop by
2% because of this tuition hike. Assuming all other factors held
constant, you conclude that the own-price elasticity of demand for
applications to Texas A&M is equal to _______________.
5. Suppose that the own-price elasticity for Schweppes ginger ale is
-1.25. In order for Cadbury Schweppes to increase total revenue, at
least in the short run, it would be advisable to
a.) do nothing
b.) lower the price of the ginger ale.
c.) raise the price of the ginger ale.
d.) can’t tell; insufficient information.
6. Generally speaking, which of the following is true?
a.) The own-price elasticity at the retail level of the marketing
channel is greater than the own-price elasticity at the farm
level.
b.) The greater the number of substitutes of a commodity, the
greater the own-price elasticity.
c.) The own-price elasticity is more inelastic in the short run than
in the long run.
d.) All of the above.
7. If the own-price elasticity is equal to -0.8, then
a.) a 1% change in quantity demanded gives rise to a -0.8% change in
price.
b.) a 10% increase in price gives rise to an 8% decrease in quantity
demanded.
c.) a 1% increase in price leads to an 8% decrease in quantity
demanded.
d.) none of the above.
8. If the own-price elasticity for a good is -1, then the demand for the good
is said to be
a.) elastic.
b.) inelastic.
c.) unitary elastic.
d.) none of the above.